Correlation Between FEC Resources and Arrow Exploration

Can any of the company-specific risk be diversified away by investing in both FEC Resources and Arrow Exploration at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining FEC Resources and Arrow Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between FEC Resources and Arrow Exploration Corp, you can compare the effects of market volatilities on FEC Resources and Arrow Exploration and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in FEC Resources with a short position of Arrow Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of FEC Resources and Arrow Exploration.

Diversification Opportunities for FEC Resources and Arrow Exploration

0.06

Correlation Coefficient

FEC Resources  Arrow Exploration

Significant diversification

The 3 months correlation between FEC and Arrow is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding FEC Resources and Arrow Exploration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Exploration Corp and FEC Resources is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on FEC Resources are associated (or correlated) with Arrow Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Exploration Corp has no effect on the direction of FEC Resources i.e., FEC Resources and Arrow Exploration go up and down completely randomly.

Pair Corralation between FEC Resources and Arrow Exploration

Assuming the 90 days horizon FEC Resources is expected to generate 4.53 times more return on investment than Arrow Exploration. However, FEC Resources is 4.53 times more volatile than Arrow Exploration Corp. It trades about 0.14 of its potential returns per unit of risk. Arrow Exploration Corp is currently generating about 0.07 per unit of risk. If you would invest  0.19  in FEC Resources on April 30, 2025 and sell it today you would earn a total of  0.01  from holding FEC Resources or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

FEC Resources  vs.  Arrow Exploration Corp

FEC Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FEC Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, FEC Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Arrow Exploration Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Exploration Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Arrow Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FEC Resources and Arrow Exploration

The main advantage of trading using opposite FEC Resources and Arrow Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FEC Resources position performs unexpectedly, Arrow Exploration can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Arrow Exploration will offset losses from the drop in Arrow Exploration's long position.

The idea behind FEC Resources and Arrow Exploration Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stocks Directory module to find actively traded stocks across global markets.